Collectively, all cryptocurrencies make up a large part of the cryptographic assets available today. However, there are many other cryptographic assets that run on blockchain technology that are very different from cryptocurrencies. A perfect example of this is Non-Fungible Tokens.
You may then wonder, what are non-fungible tokens? What are their uses? And why are non-fungible tokens important? this article will offer answers to these questions and many other questions with regard to non-fungible tokens or NFT’s. Before we continue with this article, check this review if you are looking for the best crypto to invest your money in.
What are Non-Fungible Tokens?
According to Investopedia, “Non-fungible tokens or NFTs are cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency”.
Cryptocurrencies like Bitcoin (BTC), ether (ETH), ripple (XRP), and many others are fungible tokens. As a result, these digital assets can be used as a means of payment during business transactions. This exchange is possible because a unit of ether is equal in value to another ether of similar value. This principle applies to all fungible tokens or cryptocurrencies.
When compared to cryptocurrencies, non-fungible tokens are not identical to each other. Similarly, NFT’s cannot be used as a means for exchange for business transactions. Also, non-fungible tokens are not equal in value to each other like units of a cryptocurrency.
Often referred to as digital passports, non-fungible tokens have personalized identities, which can be transferred to any other digital token. In addition to their personalized identities, NFT’s are extensible in nature. As a result, two non-fungible tokens can be combined to create a new non-fungible token with a unique identity.
One feature of NFT’s is that owners of the tokens can input their details into the tokens. This feature adds to the uniqueness of these tokens and allows for easy identification of individuals who own the tokens. As a result, artists can sign their digital artwork with their trademark or digital signature.
Uses of Non Fungible Coins
Due to the unique nature of each non-fungible token, these tokens have the potential for several use cases. One potential use case of this cryptographic asset is it applied as a digital representative for artwork and real estate.
This is possible because NFT’s are crypto-assets that run on blockchain technology. As a result, they can be used to connect artists to their clients eliminating middlemen, while creating new markets in the process.
Presently a large percentage of non-fungible tokens are made up of collectibles like rarities, digital artworks, and sports cards. An example of such a collectible is the NBA Top Shot. The NBA Top Shot offers users the chance of collecting the best basketball in a digital form. Similarly, there is a digital token for the first tweet ever written and presently the monetary value of this digital token is about $2.5 million.
Another popular use case of non-fungible tokens can be found in the creation of Cryptokitties. Cryptokitties was created in 2017 and serves as a digital representation of cats with personalized identities on the Ethereum blockchain. On Cryptokitties, each cat has a personalized identity and specific price in Ether (ETH). Similar to live cats, the kitties can reproduce and create new cats. However, these cats have unique features and characters. Similarly, these cats all have different financial value when compared to other cats on Cryptokitties.
After its release, Crypokitties gained massive followership among users of the ethereum blockchain, with users spending over $20 million worth of ether buying, caring, and feeding the cats on Cryptokitties.
There are a host of other uses for non-fungible tokens. However, these applications are futuristic in nature and with an increase in the growth of blockchain technology, there will be an increase in the application of NFT’s.
Why are Non-Fungible Tokens Important?
Non-fungible tokens are very important cryptographic assets for a number of reasons. Simple in their application, these tokens can be used to simplify complex financial processes by providing easy and simple identification for physical assets.
This allows for personalized identification for these assets and prevents ambiguity in the identification of these assets.
Another advantage of non-fungible coins is that it provides increased market efficiency during transactions. The creation of digital representatives for physical assets optimizes the business process and eliminates the need for middlemen or intermediaries. As a result, digital artworks can be accessed easily by audiences without the need for art agents.
In terms of optimizing the business process, NFT’s make it easier to track the progress of business processes. A good example of this increase in productivity can be found in non-fungible tokens for a wine brand. With the incorporation of a digital token, users can track the production and sale process of the wines produced.
The final advantage we will consider is the creation of new markets. As a result, new investment opportunities will be created for users. This advantage specifically applies to the real estate markets as it provides an opportunity for users to invest in specific real estate properties with digital tokens.
Non-fungible tokens are different from cryptocurrencies, they are unique tokens with personalized identities. These tokens cannot be traded or used as a means of payment for financial transactions. Users of non-fungible tokens will enjoy easier access to new markets and investment opportunities. Similarly, users will enjoy faster business transactions due to the incorporation of NFT’s into their business process.